INTRODUCTION

Background

The State's housing goal is to provide a decent home and suitable living environment for every California household. California voters passed the Housing and Emergency Shelter Trust Fund Acts of 2002 and 2006 (Propositions 46 and 1C, respectively) to provide nearly $5 billion in bonds (housing bonds) for use in financing affordable housing. The two propositions allocated funds to 29 different housing programs that the California Department of Housing and Community Development (HCD), the California Housing Finance Agency, and the California Pollution Control Financing Authority administer. These three housing bond administrators have awarded the majority of Propositions 46 and 1C funds to rehabilitate older buildings, construct new affordable housing units, and assist single families with the costs associated with homeownership, including down payment assistance and home rehabilitation. Currently, California continues to face an affordable housing shortage, as Figure 1 shows.

Figure 1
California Continues to Face Insufficient Affordable Housing

Source: Statistics from the National Low Income Housing Coalition, the U.S. Census Bureau, and the U.S. Department of Housing and Urban Development.

* Unsheltered: Homeless people whose primary nighttime location is a public or private place not ordinarily used as a regular sleeping accommodation (for example, the streets, vehicles, abandoned buildings, parks, or camping grounds).

HCD's Oversight of Housing Bond Programs

HCD's mission is to provide leadership, policies, and programs to preserve and expand safe and affordable housing opportunities and to promote strong communities for all Californians. As part of its mission, HCD administers 21 of the 29 housing bond programs. These programs award housing bond funds to recipients such as cities, nonprofit housing agencies, for‑profit developers, housing development groups, and agricultural employees, with the type of recipient dependent upon the nature of the specific program. The housing bond programs are designed to help target populations afford housing in California. As Figure 2 describes, these populations include very low‑income to moderate‑income households, homeless, homeless youth, and agricultural workers.

HCD generally administers two types of programs: loan‑based programs in which recipients pay back the funds, and grant‑based programs, in which they do not. In loan‑based programs, HCD receives principal and interest payments and fees for project monitoring, while it generally does not receive these payments for grant‑based programs. Two of the programs HCD administers are CalHome and Building Equity and Growth in Neighborhoods (BEGIN)—grant‑based programs that are earmarked to receive $505 million and $106 million, respectively, of the housing bond funds. These programs generally allow low‑income and very low‑income households to become first‑time homebuyers or remain homeowners.

HCD's Monitoring of Program Allocations

HCD's role does not end once it provides awards. HCD is responsible for monitoring the award recipients' compliance with state law, regulations, and program requirements. It does so by ensuring that recipients continue to provide safe and affordable housing and that the homes its awards finance remain well maintained. HCD's monitoring of these housing bond programs is important given that they account for $4.39 billion of the bond funds, as Figure 3 shows.

HCD put the Consolidated Automated Program Enterprise System (CAPES) into service in 2007 to serve as its department‑wide data collection and organization system to track awards and monitor housing loans and grants. However, as we discuss later in this report, not all HCD divisions use it to manage their work because the system does not yet have full functionality.

Figure 2
HCD's Housing Bond Programs We Reviewed Are Intended to Help Target Populations Afford Housing

Source: Analysis of state law and regulations, HCD program guidelines, and funding levels for Propositions 46 and 1C as of December 31, 2017.

Administrative Spending

By statute, HCD can use up to 5 percent of the funds it appropriates to certain programs for administrative costs. These programs include CalHome and BEGIN. When these two programs award funds, HCD has 20‑year monitoring agreements with the recipients. These grant‑based programs do not receive fees from the recipients to help pay for administrative costs; rather, state law authorizes HCD to use up to 5 percent of the program‑specific housing bond funds for this purpose. These administrative costs include HCD's costs related to its program‑related operational activities, including making awards and monitoring recipients to ensure that their use of awards complies with state law, regulation, and program guidelines.

Figure 3
HCD Awarded Almost All of Propositions 46 and 1C Housing Bond Funds to Create New Housing Units and Assist Individuals in Homeownership

Potential Future Housing Bonds

As the text box shows, California voters will decide in November 2018 whether to approve an additional $3 billion in housing bonds, including $2.85 billion for the housing programs that HCD currently oversees. The ballot measure would provide more money to many of the same programs that Propositions 46 and 1C funded. According to the senate bill that created this ballot measure, investment in existing and successful housing programs to expand the State's housing stock should benefit California's homeless population and low‑income earners, as well as some of the State's most vulnerable populations, such as foster and at‑risk youth, persons with developmental and physical disabilities, farmworkers, the elderly, single parents with children, and survivors of domestic violence.

Recommendations From Our Previous Audits

As Table 1 below illustrates, our office performed four previous audits of HCD's administration of housing bond programs. We found that HCD failed to adequately monitor some of its housing bond programs, to fully implement its housing bond database, and to ensure that it did not exceed administrative spending limits. We made a total of 28 recommendations to HCD to address the problems we identified in those audits.

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